CM September 2020

OPINION
AUTHOR – Heather Greig-Smith
Have Have you you accepted accepted longer longer payments payments than you than feel comfortable you feel with over the past twelve months?*
comfortable % with over the past twelve months?*
0,5
SME
49%
Large
corporation
0,4
0,3
SME
Large
corporation
0,2
0,1
43%
43%
43%
16%
26%
22%
The long-term effects of the
COVID-19 crisis are unknown,
with a decline in consumer
demand for some services
and activities presenting an
ongoing challenge.
19%
12%
*The is a multiple answer
question, hence the total add
up to more than 100%
0,0
Yes, from a
small to medium
company
Yes, from a large/
multinational
corporation
Yes, from a public
sector company
No
1% 1%
Not sure
*) The companies is a multiple answer are question, looking hence the for total extended add up to more than help 100%. share of late payment pressure,” Eddie
8) Entrepreneurship and Small & medium-sized enterprises (SMEs), European Commission website
to navigate through the challenges – 56 continues. “Often these companies are
percent in the UK said they feel a new not well-placed when it comes to credit
legislation is needed. But building a management and debt collection as they
12 sustainable payment EPR culture 2020 Special will Edition require Covid-19 White Paper
a change in behaviour. To an extent, this
is already happening, with businesses
seeking initiatives at a local and European
level to tackle the problem.
For example, there has been a rise in
the adoption of the EU Late Payment
Directive in the UK, despite its exit from
the EU: 27 percent of UK businesses in the
survey say they always use it, compared
with five percent in 2019. Meanwhile, on
a European level, almost half (47 percent)
of respondents would like to see voluntary
initiatives from corporations – a rise of 15
percent from last year. “Awareness of the
impact of late payment and the options
open to businesses under EU and UK
legislation is important. These and further
voluntary initiatives will be essential in
ensuring steady cashflow for businesses
as we emerge from the immediate crisis,”
Eddie adds.
SMES SQUEEZED
For small businesses, late payment can
mean the difference between survival and
bankruptcy, limiting their ability to pay
employees and suppliers, cover operating
costs and pursue growth opportunities.
Across Europe, Intrum found SMEs are
more likely than their larger counterparts
to accept unfavourable late payment
terms – 49 percent had accepted this from
a fellow SME, compared with 43 percent
of their large corporation peers.
“It is a concern that small businesses
may be shouldering more than their fair
lack the scale to have dedicated resources
in these areas.”
For small
businesses,
late payment
can mean the
difference
between survival
and bankruptcy,
limiting their
ability to pay
employees and
suppliers.
With SMEs representing 99 percent
of businesses in the EU, the impact of
COVID-19 increases the urgency of finding
a solution to this problem. Ensuring
their recovery post COVID-19 will be an
essential ingredient in European recovery,
both at corporate and consumer levels.
IRISH DISPUTES
In Ireland, COVID-19 has intensified
disputes regarding goods and services.
Over half of Irish businesses (51 percent)
rank disputes regarding goods and
services within their top three challenges
to timely payment over the next 12
months – above the European average of
30 percent, and the highest percentage
across Europe.
This figure increases from 44 percent
for those surveyed before the COVID-19
crisis to 55 percent of those surveyed
during the crisis. Meanwhile businesses
in Ireland are looking to cut down
on recruitment. Almost half of Irish
companies surveyed (48 percent) plan to
cut down on recruitment in preparation
for a recession, compared to the European
average of 29 percent. This figure is the
highest in Europe.
LONG-TERM IMPACT
The long-term effects of the COVID-19
crisis are unknown, with a decline in
consumer demand for some services
and activities presenting an ongoing
challenge. As businesses are forced to
reduce headcount in response, this may
negatively impact consumer ability to pay
invoices due to lower disposable income.
Businesses that are able to safeguard
their liquidity will emerge stronger from
the crisis, while those with less liquidity
to fall back on may find themselves under
threat. Prompt payment initiatives will
be crucial in ensuring steady cashflow
and recovery. These issues need careful
attention to secure economic stability.
For more information: https://
www.intrum.co.uk/business-solutions/
analytics-insights/european-paymentreport-2020/
Heather Greig-Smith is a freelance
business writer.
Advancing the credit profession / www.cicm.com / September 2020 / PAGE 15